Can I File for Bankruptcy if I Lost My Job?

Getting let go from your current job position may be a devastating blow to you and your household, both emotionally and financially. It may seem drastic to declare bankruptcy after a job loss, instead of simply holding out hope that the next employment opportunity is right around the corner. However, given your outstanding debts and demanding household expenses, all without your primary source of income, you may find this to be a sound choice. If so, please continue reading to learn whether you can file for consumer bankruptcy after you lost your job and how an experienced Louisville, Kentucky Chapter 7 bankruptcy lawyer at Schwartz Bankruptcy Law Center can help you coordinate the timing of it all.

Can I file for Chapter 7 bankruptcy if I recently lost my job?

In short, your current employment status alone should not affect your eligibility to file for Chapter 7 bankruptcy. However, the timing of your filing may matter for this. This is because you must first pass the Chapter 7 means test. Here, you must calculate your household’s gross income for the past six months. Then, you must compare it to Kentucky’s median income for your household size as of 2025. Essentially, you pass the test automatically if your household income falls below the median income.

So, say you lost your job less than six months ago, and you may have been receiving a sizable paycheck up until this point. Having a sizable household income for a few of these countable months may put you over the set median amount. In this case, you may still have a chance to pass the means test by calculating your allowable expenses and subtracting them from your gross income. Namely, your allowable expenses may entail things like your income taxes, childcare expenses, grocery bills, housing costs, utility bills, etc., to demonstrate your true disposable income amount and thereby your true qualification for a Chapter 7 bankruptcy case.

Can I file for Chapter 13 bankruptcy if I’m unemployed?

If you still cannot pass the Chapter 7 means test even after counting your allowable expenses, your appointed bankruptcy trustee may recommend to the Kentucky bankruptcy court that your case be converted to Chapter 13. This is because they may argue that you have enough funds to afford the mandatory three- to five-year repayment plan of your debts. And so, we generally recommend that, if financially feasible, to wait until six months after losing your job to submit your Chapter 7 bankruptcy petition. In the meantime, you may take advantage of unemployment benefits and develop a new budget that cuts out any unnecessary expenses.

On the flip side, you may be interested in Chapter 13 bankruptcy even though you are unemployed, because you want to be able to keep your property and assets and repay your creditors what they deserve. With this, you must make a strong argument that you have other verifiable sources of income besides an employment paycheck to afford the mandatory repayment plan. Such income sources may include revenue generated from your businesses and rental properties, Social Security benefits, retirement benefits, and lastly, unemployment benefits.

In conclusion, if you find yourself in need of legal aid, look no further than a skilled Louisville, Kentucky consumer bankruptcy lawyer. Whether you simply have a legal question or require legal representation in an upcoming court case, our team at Schwartz Bankruptcy Law Center is willing to help out. Please pick up the phone and call us today.